I 117TH CONGRESS 1ST SESSION H. R. 25 To promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national sales tax to be administered primarily by the States. IN THE HOUSE OF REPRESENTATIVES JANUARY 4, 2021 Mr. CARTER of Georgia introduced the following bill; which was referred to the Committee on Ways and Means A BILL To promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national sales tax to be administered primarily by the States. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 3 (a) SHORT TITLE.—This Act may be cited as the 4 ‘‘FairTax Act of 2021’’. 5 (b) TABLE OF CONTENTS.—The table of contents for 6 this Act is as follows: 7 Sec. 1. Short title; table of contents. VerDate Sep 11 2014 23:15 Jan 22, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6211 E:\BILLS\H25.IH H25 pbinns on DSKJLVW7X2PROD with BILLS 2 •HR 25 IH Sec. 2. Congressional findings. TITLE I—REPEAL OF THE INCOME TAX, PAYROLL TAXES, AND ESTATE AND GIFT TAXES Sec. 101. Income taxes repealed. Sec. 102. Payroll taxes repealed. Sec. 103. Estate and gift taxes repealed. Sec. 104. Conforming amendments; effective date. TITLE II—SALES TAX ENACTED Sec. 201. Sales tax. Sec. 202. Conforming and technical amendments. TITLE III—OTHER MATTERS Sec. 301. Phase-out of administration of repealed Federal taxes. Sec. 302. Administration of other Federal taxes. Sec. 303. Sales tax inclusive Social Security benefits indexation. TITLE IV—SUNSET OF SALES TAX IF SIXTEENTH AMENDMENT NOT REPEALED Sec. 401. Elimination of sales tax if Sixteenth Amendment not repealed. SEC. 2. CONGRESSIONAL FINDINGS. 1 (a) FINDINGS RELATING TO FEDERAL INCOME 2 TAX.—Congress finds the Federal income tax— 3 (1) retards economic growth and has reduced 4 the standard of living of the American public; 5 (2) impedes the international competitiveness of 6 United States industry; 7 (3) reduces savings and investment in the 8 United States by taxing income multiple times; 9 (4) slows the capital formation necessary for 10 real wages to steadily increase; 11 (5) lowers productivity; 12 VerDate Sep 11 2014 23:15 Jan 22, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H25.IH H25 pbinns on DSKJLVW7X2PROD with BILLS 3 •HR 25 IH (6) imposes unacceptable and unnecessary ad- 1 ministrative and compliance costs on individual and 2 business taxpayers; 3 (7) is unfair and inequitable; 4 (8) unnecessarily intrudes upon the privacy and 5 civil rights of United States citizens; 6 (9) hides the true cost of government by embed- 7 ding taxes in the costs of everything Americans buy; 8 (10) is not being complied with at satisfactory 9 levels and therefore raises the tax burden on law 10 abiding citizens; and 11 (11) impedes upward social mobility. 12 (b) FINDINGS RELATING TO FEDERAL PAYROLL 13 TAXES.—Congress finds further that the Social Security 14 and Medicare payroll taxes and self-employment taxes— 15 (1) raise the cost of employment; 16 (2) destroy jobs and cause unemployment; and 17 (3) have a disproportionately adverse impact on 18 lower income Americans. 19 (c) FINDINGS RELATING TO FEDERAL ESTATE AND 20 GIFT TAXES.—Congress finds further that the Federal es- 21 tate and gift taxes— 22 (1) force family businesses and farms to be sold 23 by the family to pay such taxes; 24 VerDate Sep 11 2014 23:15 Jan 22, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H25.IH H25 pbinns on DSKJLVW7X2PROD with BILLS 4 •HR 25 IH (2) discourage capital formation and entrepre- 1 neurship; 2 (3) foster the continued dominance of large en- 3 terprises over small family-owned companies and 4 farms; and 5 (4) impose unacceptably high tax planning costs 6 on small businesses and farms. 7 (d) FINDINGS RELATING TO NATIONAL SALES 8 TAX.—Congress finds further that a broad-based national 9 sales tax on goods and services purchased for final con- 10 sumption— 11 (1) is similar in many respects to the sales and 12 use taxes in place in 45 of the 50 States; 13 (2) will promote savings and investment; 14 (3) will promote fairness; 15 (4) will promote economic growth; 16 (5) will raise the standard of living; 17 (6) will increase investment; 18 (7) will enhance productivity and international 19 competitiveness; 20 (8) will reduce administrative burdens on the 21 American taxpayer; 22 (9) will improve upward social mobility; and 23 (10) will respect the privacy interests and civil 24 rights of taxpayers. 25 VerDate Sep 11 2014 23:15 Jan 22, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H25.IH H25 pbinns on DSKJLVW7X2PROD with BILLS 5 •HR 25 IH (e) FINDINGS RELATING TO ADMINISTRATION OF 1 NATIONAL SALES TAX.—Congress further finds that— 2 (1) most of the practical experience admin- 3 istering sales taxes is found at the State govern- 4 mental level; 5 (2) it is desirable to harmonize Federal and 6 State collection and enforcement efforts to the max- 7 imum extent possible; 8 (3) it is sound tax administration policy to fos- 9 ter administration and collection of the Federal sales 10 tax at the State level in return for a reasonable ad- 11 ministration fee to the States; and 12 (4) businesses that must collect and remit taxes 13 should receive reasonable compensation for the cost 14 of doing so. 15 (f) FINDINGS RELATING TO REPEAL OF PRESENT 16 FEDERAL TAX SYSTEM.—Congress further finds that the 17 16th Amendment to the United States Constitution should 18 be repealed. 19 VerDate Sep 11 2014 23:15 Jan 22, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H25.IH H25 pbinns on DSKJLVW7X2PROD with BILLS 6 •HR 25 IH TITLE I—REPEAL OF THE IN- 1 COME TAX, PAYROLL TAXES, 2 AND ESTATE AND GIFT TAXES 3 SEC. 101. INCOME TAXES REPEALED. 4 Subtitle A of the Internal Revenue Code of 1986 (re- 5 lating to income taxes and self-employment taxes) is re- 6 pealed. 7 SEC. 102. PAYROLL TAXES REPEALED. 8 (a) IN GENERAL.—Subtitle C of the Internal Rev- 9 enue Code of 1986 (relating to payroll taxes and with- 10 holding of income taxes) is repealed. 11 (b) FUNDING OF SOCIAL SECURITY.—For funding of 12 the Social Security Trust Funds from general revenue, see 13 section 201 of the Social Security Act (42 U.S.C. 401). 14 SEC. 103. ESTATE AND GIFT TAXES REPEALED. 15 Subtitle B of the Internal Revenue Code of 1986 (re- 16 lating to estate and gift taxes) is repealed. 17 SEC. 104. CONFORMING AMENDMENTS; EFFECTIVE DATE. 18 (a) CONFORMING AMENDMENTS.—The Internal Rev- 19 enue Code of 1986 is amended— 20 (1) by striking subtitle H (relating to financing 21 of Presidential election campaigns); and 22 (2) by redesignating— 23 (A) subtitle D (relating to miscellaneous 24 excise taxes) as subtitle B; 25 VerDate Sep 11 2014 23:15 Jan 22, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H25.IH H25 pbinns on DSKJLVW7X2PROD with BILLS 7 •HR 25 IH (B) subtitle E (relating to alcohol, tobacco, 1 and certain other excise taxes) as subtitle C; 2 (C) subtitle F (relating to procedure and 3 administration) as subtitle D; 4 (D) subtitle G (relating to the Joint Com- 5 mittee on Taxation) as subtitle E; 6 (E) subtitle I (relating to the Trust Fund 7 Code) as subtitle F; 8 (F) subtitle J (relating to coal industry 9 health benefits) as subtitle G; and 10 (G) subtitle K (relating to group health 11 plan portability, access, and renewability re- 12 quirements) as subtitle H. 13 (b) REDESIGNATION OF 1986 CODE.— 14 (1) IN GENERAL.—The Internal Revenue Code 15 of 1986 enacted on October 22, 1986, as heretofore, 16 hereby, or hereafter amended, may be cited as the 17 Internal Revenue Code of 2021. 18 (2) REFERENCES IN LAWS, ETC.—Except when 19 inappropriate, any reference in any law, Executive 20 order, or other document— 21 (A) to the Internal Revenue Code of 1986 22 shall include a reference to the Internal Rev- 23 enue Code of 2021; and 24 VerDate Sep 11 2014 23:15 Jan 22, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H25.IH H25 pbinns on DSKJLVW7X2PROD with BILLS 8 •HR 25 IH (B) to the Internal Revenue Code of 2021 1 shall include a reference to the provisions of law 2 formerly known as the Internal Revenue Code 3 of 1986. 4 (c) ADDITIONAL AMENDMENTS.—For additional con- 5 forming amendments, see section 202 of this Act. 6 (d) EFFECTIVE DATE.—Except as otherwise pro- 7 vided in this Act, the amendments made by this Act shall 8 take effect on January 1, 2021. 9 TITLE II—SALES TAX ENACTED 10 SEC. 201. SALES TAX. 11 (a) IN GENERAL.—The Internal Revenue Code of 12 2021 is amended by inserting before subtitle B (as redes- 13 ignated by section 104(a)(2)(A)) the following new sub- 14 title: 15 ‘‘Subtitle A—Sales Tax 16 ‘‘Sec. 1. Principles of interpretation. ‘‘Sec. 2. Definitions. ‘‘CHAPTER 1. INTERPRETATION; DEFINITIONS; IMPOSITION OF TAX; ETC. ‘‘CHAPTER 2. CREDITS; REFUNDS ‘‘CHAPTER 3. FAMILY CONSUMPTION ALLOWANCE ‘‘CHAPTER 4. FEDERAL AND STATE COOPERATIVE TAX ADMINISTRATION ‘‘CHAPTER 5. OTHER ADMINISTRATIVE PROVISIONS ‘‘CHAPTER 6. COLLECTIONS; APPEALS; TAXPAYER RIGHTS ‘‘CHAPTER 7. SPECIAL RULES ‘‘CHAPTER 8. FINANCIAL INTERMEDIATION SERVICES ‘‘CHAPTER 9. ADDITIONAL MATTERS VerDate Sep 11 2014 23:15 Jan 22, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6211 E:\BILLS\H25.IH H25 pbinns on DSKJLVW7X2PROD with BILLS 9 •HR 25 IH ‘‘SEC. 1. PRINCIPLES OF INTERPRETATION. 1 ‘‘(a) IN GENERAL.—Any court, the Secretary, and 2 any sales tax administering authority shall consider the 3 purposes of this subtitle (as set forth in subsection (b)) 4 as the primary aid in statutory construction. 5 ‘‘(b) PURPOSES.—The purposes of this subtitle are 6 as follows: 7 ‘‘(1) To raise revenue needed by the Federal 8 Government in a manner consistent with the other 9 purposes of this subtitle. 10 ‘‘(2) To tax all consumption of goods and serv- 11 ices in the United States once, without exception, 12 but only once. 13 ‘‘(3) To prevent double, multiple, or cascading 14 taxation. 15 ‘‘(4) To simplify the tax law and reduce the ad- 16 ministration costs of, and the costs of compliance 17 with, the tax law. 18 ‘‘(5) To provide for the administration of the 19 tax law in a manner that respects privacy, due proc- 20 ess, individual rights when interacting with the gov- 21 ernment, the presumption of innocence in criminal 22 proceedings, and the presumption of lawful behavior 23 in civil proceedings. 24 VerDate Sep 11 2014 23:15 Jan 22, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H25.IH H25 pbinns on DSKJLVW7X2PROD with BILLS 10 •HR 25 IH ‘‘(6) To increase the role of State governments 1 in Federal tax administration because of State gov- 2 ernment expertise in sales tax administration. 3 ‘‘(7) To enhance generally cooperation and co- 4 ordination among State tax administrators; and to 5 enhance cooperation and coordination among Fed- 6 eral and State tax administrators, consistent with 7 the principle of intergovernmental tax immunity. 8 ‘‘(c) SECONDARY AIDS TO STATUTORY CONSTRUC- 9 TION.—As a secondary aid in statutory construction, any 10 court, the Secretary, and any sales tax administering au- 11 thority shall consider— 12 ‘‘(1) the common law canons of statutory con- 13 struction, 14 ‘‘(2) the meaning and construction of concepts 15 and terms used in the Internal Revenue Code of 16 1986 as in effect before the effective date of this 17 subtitle, and 18 ‘‘(3) construe any ambiguities in this Act in 19 favor of reserving powers to the States respectively, 20 or to the people. 21 ‘‘SEC. 2. DEFINITIONS. 22 ‘‘(a) IN GENERAL.—For purposes of this subtitle— 23 ‘‘(1) AFFILIATED FIRMS.—A firm is affiliated 24 with another if 1 firm owns 50 percent or more of— 25 VerDate Sep 11 2014 23:15 Jan 22, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H25.IH H25 pbinns on DSKJLVW7X2PROD with BILLS 11 •HR 25 IH ‘‘(A) the voting shares in a corporation, or 1 ‘‘(B) the capital interests of a business 2 firm that is not a corporation. 3 ‘‘(2) CONFORMING STATE SALES TAX.—The 4 term ‘conforming State sales tax’ means a sales tax 5 imposed by a State that adopts the same definition 6 of taxable property and services as adopted by this 7 subtitle. 8 ‘‘(3) DESIGNATED COMMERCIAL PRIVATE COU- 9 RIER SERVICE.—The term ‘designated commercial 10 private courier service’ means a firm designated as 11 such by the Secretary or any sales tax administering 12 authority, upon application of the firm, if the firm— 13 ‘‘(A) provides its services to the general 14 public, 15 ‘‘(B) records electronically to its data base 16 kept in the regular course of its business the 17 date on which an item was given to such firm 18 for delivery, and 19 ‘‘(C) has been operating for at least 1 20 year. 21 ‘‘(4) EDUCATION AND TRAINING.—The term 22 ‘education and training’ means tuition for primary, 23 secondary, or postsecondary level education, and job- 24 related training courses. Such term does not include 25 VerDate Sep 11 2014 23:15 Jan 22, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H25.IH H25 pbinns on DSKJLVW7X2PROD with BILLS 12 •HR 25 IH room, board, sports activities, recreational activities, 1 hobbies, games, arts or crafts or cultural activities. 2 ‘‘(5) GROSS PAYMENTS.—The term ‘gross pay- 3 ments’ means payments for taxable property or serv- 4 ices, including Federal taxes imposed by this title. 5 ‘‘(6) INTANGIBLE PROPERTY.— 6 ‘‘(A) IN GENERAL.—The term ‘intangible 7 property’ includes copyrights, trademarks, pat- 8 ents, goodwill, financial instruments, securities, 9 commercial paper, debts, notes and bonds, and 10 other property deemed intangible at common 11 law. The Secretary shall, by regulation resolve 12 differences among the provisions of common 13 law of the several States. 14 ‘‘(B) CERTAIN TYPES OF PROPERTY.— 15 Such term does not include tangible personal 16 property (or rents or leaseholds of any term 17 thereon), real property (or rents or leaseholds 18 of any term thereon) and computer software. 19 ‘‘(7) PERSON.—The term ‘person’ means any 20 natural person, and unless the context clearly does 21 not allow it, any corporation, partnership, limited li- 22 ability company, trust, estate, government, agency, 23 administration, organization, association, or other 24 legal entity (foreign or domestic). 25 VerDate Sep 11 2014 23:15 Jan 22, 2021 Jkt 019200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H25.IH H25 pbinns on DSKJLVW7X2PROD with BILLS 13 •HR 25 IH ‘‘(8) PRODUCE, PROVIDE, RENDER, OR SELL 1 TAXABLE PROPERTY OR SERVICES [Text truncated for display. Full text available on Congress.gov.]